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US goods trade deficit widens as imports rebound

The overall trade deficit is on track to record its first annual decline since 2013.

January 29, 2020 / 09:06 PM IST

The US goods trade deficit increased sharply in December as imports rebounded, offsetting a small rise in exports, but trade is still expected to have supported economic growth in the fourth quarter.

The Commerce Department said on Wednesday the goods trade gap surged 8.5% to $68.3 billion last month. The goods trade deficit had dropped for three straight months, driven by declining imports.

The overall trade deficit is on track to record its first annual decline since 2013. Economists say the Trump administration's "America First" agenda, underscored by an 18-month trade war with China, has restricted the flow of goods, particularly imports.

Though Washington and Beijing signed a Phase 1 trade deal this month, US duties remained in effect on $360 billion of Chinese imports, about two-thirds of the total.

In December, goods imports surged 2.9% to $205.3 billion after decreasing 1.3% in November. Imports were boosted by industrial supplies, food, consumer and capital goods. Motor vehicle and parts imports, however, fell last month.


Exports of goods rose 0.3% last month to $137.0 billion after increasing 0.8% in November. There were increases in exports of industrial supplies and capital goods. Exports of consumer goods and motor vehicles and parts dropped. Food exports were unchanged last month.

Despite the sharp widening in the goods trade deficit last month, the overall goods trade deficit was probably smaller in the fourth quarter relative to the July-September period. This would be positive for the calculation of gross domestic product.

Trade subtracted 0.14 percentage point from GDP growth in the third quarter. The economy grew at a 2.1% annualized rate in the July-September quarter. The Atlanta Federal Reserve is forecasting GDP rising at a 1.9% pace in the fourth quarter.

But the anticipated trade boost to GDP growth could be offset by a smaller pace of inventory accumulation relative to the third quarter.

The Commerce Department also reported on Wednesday that retail inventories were unchanged in December after declining 0.8% in the prior month. Motor vehicle and parts inventories were also flat after falling 1.8% in November.

Retail inventories, excluding motor vehicles and parts, the component that goes into the calculation of GDP, were also unchanged after decreasing 0.3% in November.

Wholesale inventories dipped 0.1% last month after gaining 0.1% in November.

first published: Jan 29, 2020 09:00 pm
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